Applying for financial aid can seem like a daunting task. Beyond all the paperwork, just mastering the number acronyms involved — FAFSA, EFC, AGI — can make applying for help seem like learning a new language. And with unemployment rates hovering around 10%, the number of students and their families who are seeking aid is on the rise.
Lamar Barton, senior financial aid advisor at South University — Virginia Beach, is among those who have been seeing an increase in the number of students seeking aid. Barton believes that new tax incentives from the federal government, coupled with guidance from experienced higher education financial aid professionals, are giving aid seekers hope that they can finally make the dream of a college education a reality.
According to the U.S. Department of Education’s National Center for Education Statistics, 66% of all undergraduates received some type of financial aid during the 2007-08 school year. Over one third of students took out loans averaging $7,100.
“The enhanced tax credits for college tuition not only give families a reduction in tax liability on their federal return, but they get a second reduction [this time to income] when they report the credit on the FAFSA [Free Application for Federal Student Aid],” Barton says.
“Ultimately, a lower income may lower the EFC [expected family contribution], which may provide a better financial aid package,” she notes.
As an incentive to pursue higher education, the federal government has stepped in, providing tax breaks to those struggling with college costs. These tax breaks, which vary depending upon income, include a tax deduction of up to $4,000 in tax year 2009 for education related expenses. No itemization is needed, but families are limited to a $4,000 deduction no matter how many students are in the family. Talk to financial aid professionals for more details.
Students and parents are also finding it easier to write off more of their student loan interest, now that Adjusted Gross Income (AGI) limitations have been relaxed, allowing for deductions of up to $2,500 on interest charges.
Another benefit in the 2009 and 2010 tax years is the American Opportunity credit, which allows for a deduction of 100% of the first $2,000 of a student's post high school annual tuition and fees as well as 25% of the next $2,000. The American Opportunity credit, however, comes with rules about the time span in which credits may be taken, so seek details from a financial aid professional.
As applicants explore these and other financial aid options, they quickly find that getting the maximum amount of aid possible is not just about loans, scholarships, and grants. It’s also about filling out required forms correctly and on time.
Craig Daugherty, director of Financial Aid at Kenyon College, emphasizes the need for applicants to meet deadlines, stating “missing a financial aid deadline can cost a family a great deal of financial aid.” He adds that students and families must be diligent in responding to any request for additional information that may be needed to complete or finalize their financial aid applications.
Barton suggests that applicants build a strong relationship with the financial aid advisors at their schools of interest. In her position, Barton advises students to use networking to spread the word about their situation. “That is the best way to find out about local scholarship opportunities,” she says.
Checking into internal scholarships and VA funding may also benefit students. And, like Daugherty, Barton strongly recommends that students check — and recheck — the information on their application forms. “Make sure that all information is reported accurately on the FASFA,” she states.
Incorrect reporting on applications is one of the biggest impediments to receiving the maximum amount of aid. One of the most common mistakes Barton sees is when a student erroneously marks on the FAFSA that they have a bachelor’s degree when in fact they’re applying for aid to pursue that degree. This common mistake actually makes the applicant ineligible for a Pell Grant. “I cannot stress enough the importance of slowing down and reading the questions. Most errors are simply careless mistakes,” she says.
To reduce the instances of errors, many schools offer students the opportunity to schedule meetings and fill out forms alongside a financial aid advisor. Applicants should prepare for these meetings in advance and bring all requested documents such as tax forms, a current driver’s license or state-issued ID card, social security card, and references.
Barton knows that increased aid often means an increase in the debt students and families take on to fund higher education. As a part of her discussions with parents and students, she urges caution and provides loan counseling as students explore the wide variety of repayment plans. “This helps to make the students fully aware of the responsibilities of borrowing,” she says.
Even colleges are planning for a future that may tax their financial aid resources. According to Daugherty, Kenyon College has already set aside contingency funds. “We anticipated we would need additional institutional resources to meet the increase in both aid applications and need levels,” he states.
“There is no question the economy is impacting the financial aid process,” Daugherty adds. “We have experienced an increase in aid applications as well as an increase in the amount of aid a student qualifies for.”
For more specific details on tax credits, check out these sites:
South University Financial Aid
Turbo Tax: Bigger, Better Tax Credit
Smart Money: The College Tax Breaks Explained
Written by freelance talent for South Source.